1 Departmental spending
1. The use of consultants and interims is an area
of significant discretionary spending. NAO analysis shows that
in 2009-10 departments spent £789 million on consultants
and an estimated £215 million on interims. In May 2010 the
Government announced immediate plans to save £1.1 billion
on discretionary spending, including consultancy. In June 2010
the Cabinet Office introduced new measures across government to
control the use of consultants and the recruitment of interim
staff, including collecting monthly data on the use of consultants.
Analysis indicates that the new measures are reducing the number
and value of contracts being placed.[2]
Cabinet Office data presented at the hearing suggested departments
have reduced spending by 46% in the first half of 2010-11 compared
to the previous year.[3]
2. There is a large variation between departments
as to the amount of money spent on consultants compared to their
staff costs.[4] For example,
for every £100 spent on its staff, the Department for Transport
spends a further £70 on consultants whilst HM Revenue &
Customs spends just £2.[5]
There may be legitimate reasons for departments to have differing
levels of consultancy use but the Cabinet Office was unable to
explain broadly what each department should expect to spend on
consultants.[6]
3. The Cabinet Office was also unable to explain
the reasons why there is such variation in departments' reductions
in spending since stringent controls were introduced post-election.
The Department of Health, for example, has reduced its spending
by 95% in the first half of 2010-11, whereas the Department for
Transport has only reduced its spending by 1%.[7]
The Cabinet Office insists that there is a clear approvals process
for spending. However, it did acknowledge that much of the reduction
may be due to stopping past programmes.[8]
4. There is a danger of a 'stop-go' approach to spending
on consultancy and the Cabinet Office told us that there is likely
to be a resurgence in consultancy spending during this Parliament.[9]
Reducing consultancy spend in an uninformed way to make short
term gains can result in significant long-term cost increases
and poor value for money for the taxpayer. For example, HM Revenue
& Customs, had ceased hiring consultants for six months which
had stopped its proactive campaigns on tax collection. It seems
at odds with achieving good value for money to stop spending on
consultants that are needed to run a revenue increasing scheme.[10]
5. Arms length bodies spent an estimated £700
million on consultancy in 2009-10, almost as much as core departments
but the data on spending in these organisations appears to be
a complete black hole.[11]
The Cabinet Office told us that due to the independent status
of some arms length bodies it is not possible to get a grip on
their spending. Transparency on this point should not be optional.
It is perfectly reasonable to expect visibility of arms length
bodies' spending given the money is handed to them by central
government.[12]
6. Departments have a poor understanding of the work
that consultants routinely perform for them. The National Audit
Office report found that few departments were able to provide
details on their spending on consultants broken down by categories
as defined in the Public Sector Procurement Expenditure Survey,
and over a third of all spending was uncategorised.[13]
The Cabinet Office told us it is focussed on improving information
across central government departments and arms length bodies so
it has a stronger baseline against which to measure progress.
It committed to having a category purchasing system up and running
by the start of the next financial year.[14]
7. Spending on interims is particularly unclear across
government. The Cabinet Office has an understanding of the total
number of interims across government and estimated that the spending
on them represented around 2% of the total pay bill.[15]
Available data was not detailed enough to gather an understanding
of how long individual interims are employed for, what positions
they hold, and how much they are paid.[16]
2 C&AG's Report, para 5 Back
3
Qq 8 and 17, Ev 19 Back
4
Q 3: C&AG's Report, para 1,9 Back
5
C&AG's Report, figure 5 Back
6
Qq 3 and 122 Back
7
Q 8, Ev 19 Back
8
Q 8-11 Back
9
Qq 48-49, 51 Back
10
Qq 13-14 Back
11
Qq 17 and 19: C&AG's Report, para 15 Back
12
Q 41 Back
13
Q 121: C&AG's Report, para 2.8 and 1.10 Back
14
Q 121 Back
15
Qq 21 and 22 Back
16
Qq 22 and 23 Back
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